Andatee China Marine Fuel Services Corporation Reports First Quarter 2014 Financial Results

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| Source: Andatee China Marine Fuel Services Corporation

BEIJING, May 15, 2014 (GLOBE NEWSWIRE) -- Andatee China Marine Fuel Services Corporation (Nasdaq:AMCF), a leading independent operator engaged in the production, storage, distribution, trading of blended marine fuel oil for cargo and fishing vessels in China, today announced its financial results for the first quarter of 2014 ended March 31, 2014.

First Quarter 2014 Financial Highlights:

  • Total sales in Q1 2014 decreased by 22% to $42 million from $53.6 million in Q1 2013
  • Gross profit in Q1 2014 decreased by 17.6% to $2.86 million from $3.47 million in Q1 2013. Gross margin increased from 6.5% in Q1 2013 to 6.8% in Q1, 2014
  • Income from operations in Q1 2014 was $0.3 million as compared to $1.36 million in Q1 2013
  • Net loss increased by $3.8 million, from net income of $334,972 for Q1 2013 to net loss of $3.42 million for Q1, 2014

Mr. Wang Hao, Chairman and Chief Executive Officer of Andatee China Marine Fuel Services Corporation, commented, "The general slow-down of the Chinese economy, seasonality's impact on the fishing industry, as well as the global crude oil price fluctuation in the aggregate resulted in a decrease in our sales in Q1 2014 and caused a net loss of $3.42 million. Notwithstanding the foregoing, however, we intend to remain active in the efforts to increase our share of retail sales, acquire our own retail facilities, build retail points in strategic locations to capture a majority of active local markets and add more products to our current product line."

"Going forward, with the fishing industry back to normal production conditions and our strategic strength being built up, we intend to improve our performance and realize sustainable long-term growth in 2014 and beyond."

First Quarter of 2014 Result

Revenue decreased by $11.7 million, or 22%, from $53.6 million in three months ended March 31, 2013 to $42 million in 2014. The decrease in revenue was mainly caused by decreased quantity sold and decreased selling price. The quantity sold decreased from 63,193 tons in three months ended March 31, 2013 to 54,205 tons in three months ended March 31, 2014, which was primarily caused by decreased sales demand for the Company's #2, #3 and #4 blended fuel oils due to reduced fishing activities as a result of holiday season's impact and severe winter weather in 2014. The average selling price for #1 fuel decreased from RMB 6,375 per ton in three months ended March 31, 2013 to RMB 4,480 per ton in three months ended March 31, 2014, a decrease of 29.7%, the average selling price for marine fuel #3 decreased 13.7% from RMB 4,953 per ton in three months ended March 31, 2013 to RMB 4,275 per ton in three months ended March 31, 2014. The decrease in selling price for these products led to the overall decrease in sales revenue. For the three months ended March 31, 2014, #1 marine fuel represented 24.4% of our sales, #2 marine fuel represented 8.6% of our sales, #3 marine fuel represented 5.9% of our sales, #4 marine fuel represented 50% of our sales, 180CST represented 5.8% of our sales and 120CST represented 5.4% of our sales, while for the three months ended March 31, 2013, #1 marine fuel represented 14.4% of our sales, #2 marine fuel represented 11.7% of our sales, #3 marine fuel represented 12.4% of our sales, #4 marine fuel represented 58.5% of our sales, 180CST represented 0.8% of our sales and 120CST represented 2.2% of our sales.

Cost of Revenue decreased by $11 million, or 22%, from $50.2 million for three months ended March 31, 2013 to $39.1 million for the three months ended March 31, 2014 primarily due to decreased sales volume and global oil price fluctuation.

Gross Margins decreased about $0.60 million, or 17% primarily due to decreased revenue. However, our gross profit% increased from 6.5% in three months ended March 31, 2013 to 6.8% in three months ended March 31, 2014. The increase in gross profit% for the quarter ended March 31, 2014 was affected by product mix sales changes (normally 120CST and 180CST only have gross profit% of 1% to 2%, #1 and #2 fuel have gross profit% of 6% to 7%, and #3 and #4 has gross profit% of 3% to 5%), because different product has different selling price, cost of sales and gross profit%. For three months ended March 31, 2014, about 24.4% of our sales were from higher margin #1 fuel oils, which was higher than the same period of 2013. In addition, we strengthened our efforts to import fuel oils from the overseas market since the second half of 2013, which enabled us to avoid incurring higher purchase costs from domestic suppliers only. This led to the costs of purchase to decrease and gross profit% to increase.

Selling Expenses decreased by $0.23 million, or 50%, from $459,055 for the three months ended March 31, 2013 to $231,321 for the three months ended March 31, 2014. This decrease is mainly due to reduced sales promotion and oil storage tank and other facility lease expenses. As a percentage of revenues, selling expenses decreased from 0.9% for the three months ended March 31, 2013 to 0.6% for the three months ended March 31, 2014.

General and Administrative Expenses increased $684,362, or 41%, from $1.65 million for the three months ended March 31, 2013 to $2.31 million for the three months ended March 31, 2014. The increase was due to an increase in depreciation expense, an increase in bad debt reserves, an increase in professional service fees and consulting fees. As a percentage of revenues, general and administrative expenses increased from 3.1% for the three months ended March 31, 2013 to 5.6% for the three months ended March 31, 2014.

Interest Expense increased by $3 million, from $0.9 million for the three months ended March 31, 2013 to $3.93 million for the three months ended March 31, 2014. The increase in interest was due to our increased borrowing of short-term loans and bank notes bills for working capital and capital expenditures.

Net Income (loss) Attributable to the Company increased by $3.8 million from net income of $334,972 for the three months ended March 31, 2013 to net loss of $3.42 million for the three months ended March 31, 2014. The increase in our net loss was mainly the result of our decrease in revenues, increase in general and administrative expense, and an increase in interest expense as discussed above.

About Andatee China Marine Fuel Services Corporation, Inc.

Andatee China Marine Fuel Services Corporation, through its subsidiaries, engages in the production, storage, distribution, and trading of blended marine fuel oil for cargo and fishing vessels in the People's Republic of China. It also produces customer specific products using its proprietary blending technology. The company sells its products through distributors to retail customers in Tianjin City, Liaoning, Shandong, Jiangsu, and Zhejiang Provinces. Andatee China Marine Fuel Services Corporation is based in Dalian, the People's Republic of China.

Safe Harbor Statement

This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties including, among others, our estimates of the Company's ability to attain and sustain growth in 2014 and beyond. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. These forward-looking statements are based upon our current expectations and projections about future events and generally relate to our plans, objectives and expectations for the development of our business. Although management believes that the plans and objectives reflected in or suggested by these forward-looking statements are reasonable, all forward-looking statements involve risks and uncertainties and actual future results may be materially different from the plans, objectives and expectations expressed in this press release. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

 

ANDATEE CHINA MARINE FUEL SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
     
  March 31, 2014 December 31, 2013
     
ASSETS    
Current assets    
Cash and cash equivalents  $ 3,578,161  $ 22,638,820
Restricted cash 102,891,963 99,659,597
Accounts receivable, net 45,327,389 45,818,721
Inventories, net 22,867,524 3,893,530
Advances to suppliers, net 16,942,585 25,930,533
Deposits for land use rights 714,065 720,084
Deferred financing costs, net of accumulated amortization of $5,217,076 and $3,779,111 as of March 31, 2014 and December 31, 2013, respectively 2,439,592 4,373,603
Other current assets 3,043,086 517,320
Total current assets 197,804,365 203,552,208
     
Property, plant and equipment, net 53,259,071 54,292,903
Construction in progress 34,525,512 17,781,162
Intangible assets, net 16,013,032 16,289,315
Equity investment 1,346,343 1,351,428
Total assets  $ 302,948,323  $ 293,267,016
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities    
Short-term bank borrowings  $ 25,560,298  $ 27,821,419
Bank note payable 193,716,224 191,257,528
Accounts payable and accrued liabilities 18,606,706 3,156,079
Advances from customers 202,256 1,693,875
Loan from third parties 97,373 98,193
Related party loans payable 2,309,622 1,595,594
Taxes payable 3,518,918 6,254,057
Other liabilities 2,739,325 1,149,298
Total current liabilities 246,750,722 233,026,043
     
Warrant liability 289,451 290,687
Total liabilities 247,040,173 233,316,730
     
Commitments and contingencies    
     
Stockholders' equity    
Common stock, $0.001 par value; 50,000,000 shares authorized; 10,255,813 shares issued; 10,164,621 shares outstanding 10,256 10,256
Treasury stock, at cost; 91,192 shares (497,693) (497,693)
Additional paid-in capital 30,033,119 29,998,994
Accumulated other comprehensive income 5,728,182 6,206,460
Retained earnings 14,568,857 17,990,881
Statutory reserve 3,932,585 3,932,585
Total stockholders' equity of the Company 53,775,306 57,641,483
Non-controlling interest 2,132,844 2,308,803
Total equity 55,908,150 59,950,286
Total liabilities and stockholders' equity  $ 302,948,323  $ 293,267,016
 
ANDATEE CHINA MARINE FUEL SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
     
  Three months ended March 31,
  2014 2013
     
Revenues  $ 41,956,641  $ 53,631,654
Cost of revenues 39,092,392 50,164,236
Gross profit 2,864,249 3,467,418
     
Operating expenses    
Selling expenses 231,321 459,055
General and administrative expenses 2,334,227 1,649,865
Total operating expenses 2,565,548 2,108,920
     
Income from operations 298,701 1,358,498
     
Other income (expense)    
Interest income 192,000 211,420
Interest expense (3,929,734) (913,528)
Income from equity investment 6,257 24,916
Change in fair value of warrants 1,236 --
Other income (expense) (8,357) 33,327
Total other expense (3,738,598) (643,865)
     
(Loss) income before income tax provision (3,439,897) 714,633
     
Provision for income taxes 121,739 416,586
     
Net (loss) income (3,561,636) 298,047
Less: net loss attributable to non-controlling interest (139,612) (36,925)
Net (loss) income attributable to Andatee China Marine Fuel Services Corporation  $ (3,422,024)  $ 334,972
     
Comprehensive (loss) income    
Net (loss) income (3,561,636) 298,047
Foreign currency translation adjustment (514,624) 582,111
Comprehensive (loss) income (4,076,260) 880,158
Less: comprehensive loss attributable to non-controlling interest 175,959 (231,388)
Comprehensive (loss) income attributable to Andatee China Marine Fuel Services Corporation (3,900,301) 648,770
     
Weighted average number of shares:    
Basic 10,255,813 9,610,159
Diluted 10,255,813 9,610,159
     
(Loss) earnings per share:    
Basic  $ (0.33)  $ 0.03
Diluted  $ (0.33)  $ 0.03
 
ANDATEE CHINA MARINE FUEL SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
     
  Three months ended March 31,
  2014 2013
     
Cash flows from operating activities    
Net (loss) income for the period  $ (3,561,636)  $ 298,047
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:    
Depreciation 608,825 479,794
Amortization 92,612 126,205
Provision for doubtful accounts 552,557 525,032
Change in inventory reserve 98,226 21,640
Deferred tax benefit -- (253,353)
Amortization of deferred financing costs 3,929,387 --
Amortization of stock-based compensation 34,125 --
Income from equity investment (6,257) (24,916)
Change in fair value of warrants (1,236) --
Changes in operating assets and liabilities:    
Accounts receivable (748,970) (2,629,394)
Inventories (19,248,657) (4,328,004)
Advances to suppliers 9,141,457 (5,030,883)
Other current assets (2,497,715) (523,678)
Accounts payable and accrued liabilities 16,986,116 221,888
Advances from customers (1,488,648) (1,935,473)
Taxes payable (2,703,180) 691,875
Other liabilities 181,074 22,437
Net cash provided by (used in) operating activities 1,368,080 (12,338,783)
     
Cash flows from investing activities    
Acquisition of equity method investee -- (1,274,514)
Additions to construction in progress (17,020,854) --
Additions to property and equipment (24,372) (66,622)
Addition to intangible assets (978) --
Net cash used in investing activities (17,046,204) (1,341,136)
     
Cash flows from financing activities    
Proceeds from short term loans 11,037,347 19,038,060
Repayments of short term loans (13,081,300) (1,752,457)
Proceeds from bank notes 40,610,897 11,470,630
Repayments on bank notes (36,522,990) (19,754,975)
Restricted cash, net (4,096,080) 3,400,965
Deferred financing costs (2,017,564) --
Repayment of loans to third parties -- (174,587)
Proceeds of loans from related parties 733,418 76,604
Net cash (used in) provided by financing activities (3,336,272) 12,304,240
     
Effect of exchange rate changes on cash and cash equivalents (46,263) 6,682
     
Net decrease in cash and cash equivalents (19,060,659) (1,368,997)
     
Cash and cash equivalents, beginning of period  $ 22,638,820  $ 1,625,705
     
Cash and cash equivalents, end of period  $ 3,578,161  $ 256,708
     
Supplemental cash flow information    
Interest paid  $ 2,572,226  $ 227,259
Income taxes paid  $ 732,382  $ 312,676
Thomas Yang
Andatee Marine Fuel Services Corporation Limited
Unit C, No. 68 West Binhai Road, Xigang District,
Dalian Liaoning, China (map)
Phone: 011-86411-8240-8219
Facsimile: 011-86411-8368-8835
Website: www.andatee.com